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MICHAEL MOSSETIG: I guess we can -- we can commence. Thank you all for coming. I'm Mike Mossetig, the foreign editor of the "PBS NewsHour," broadcast online. Just a couple little housekeeping matters: Please totally turn off all your electronic devices, and this meeting is totally on the record.

I do want to start by saying that I don't think we can let this particular morning go past unnoticed, that this is the 70th anniversary of the attack on Pearl Harbor. Twenty-four-hundred Americans died there and a nation was mobilized for war: 12 million in uniform, hundreds of thousands in the factories, millions who shopped with ration books for gas and groceries. And toddlers like us remember sticking the little stamps in the war bond books to help pay for the -- help pay for the war.

And that was a terrible day for the United States, and with our speaker, Congresswoman Granger, there's a connection to the next terrible day for the United States, that you were in the Pentagon in a meeting and had just left the building before the Pentagon was attacked on 9/11.

Ms. Granger is the former mayor of Fort Worth, Texas. And when she was thinking of running for Congress, both the Democrats and the Republicans wanted her as their candidate, which raises the question, with that kind of bipartisan reach and appeal, how do you survive in the current hyperpartisan atmosphere of Washington and the U.S. Congress?

You are now the chair of the Subcommittee on State and Foreign Operations of the Appropriations Committee, a member of a group that is known on Capitol Hill as the "College of Cardinals." Unlike the one in Rome, its membership includes both women and Protestants. (Laughter.)

You have made, in the course of just this year, two trips to the Middle East, and that region is erupting in the "Arab spring." You've been to Israel, Egypt and the West Bank.

You want to make a few opening remarks and then I will do a bit of a Q&A with you, and then at half hour -- at 9:00 we will put the questions to the audience. So please go ahead.

REPRESENTATIVE KAY GRANGER (R-TX): Thank you very much. Well, I'll address what you said about my support from Democrats and Republicans.

I was a Republican, but in Texas all municipal elections are nonpartisan and I was never involved in partisan politics until I ran for the Congress. So it's been an adjustment, needless to say.

I'm going to say that I'm very proud of the fact that the subcommittee that I chair -- Nita Lowey was the ranking member -- is the ranking member now. She was the chair when I came on as ranking member and we made a conscious decision to work together and work in a very bipartisan way that I've very proud of, and we continue to do that.

And so, in most cases I'm speaking both for Mrs. Lowey and for myself because we talk literally every day. We may disagree on numbers, funding amounts, but we very, very seldom disagree on policy. And we always check with each other.

Let me talk -- I'm supposed to talk about today about Israel and the Arab Spring and how that is changing things. And I'm going to say that we're in the process right now of finishing our bill to fund foreign aid and our assistance with other countries, and that consumes our time, and it's a time when things are changing.

And you all know in this room, they're changing almost daily, so we're trying to sort of have a crystal ball, and then as much experience and information as we possibly can to see what's going to happen, and to make -- to protect our interests -- our national security interests as we go forward.

I've spent almost all of my congressional career -- I'm in my eighth session of Congress -- in some form of national security and defense. I was on the Armed Services when I came into Congress in my second session, and I was named to Appropriations and served on Military Construction and now Defense Appropriations, and that's where I've been, and then added State Foreign Operations. So I see things through a prism of national security.

As we're putting this together, there are many tricky things. One is just the legislative process and how things are very difficult right now, and I think you're all aware of that, and the gridlock in Washington and the enormous partisanship in Washington.

The other thing is the perception of foreign aid, and that is a perception from our constituents, and a lot of the members of Congress will come in and say, why should we be giving our money to any foreign country, particularly those who don't support us? And the perception is -- I think you all know this -- that it's between 20 and 30 percent of our expenditures when it's actually 1 percent.

So I spend a lot of my time -- and I know Nita Lowey does the same thing -- of bringing people together and say, no, this is why we do this; this is what is in our national security interest as well as our obligation as a country that cares, and our humanitarian interests.

Let's go particularly to Israel. I've been to Israel now five times, twice this year. As you said, I went in the spring and then I went again in August. And what I do, I meet with Prime Minister Netanyahu, Defense Minister Barak, and in the case of August, with Prime Minister Fayyad, to listen; to also say, in a very clear way, this is where we stand.

I think you know there's strong support for Israel on both sides of the aisle. There is strong support for Israel from the freshmen who came in. And Eric Cantor and I were both on a trip with freshmen in August, two different trips that Eric put together, bringing the freshmen to Israel to understand our support in what's going on there, as well as understand how the neighbors of Israel and our support -- how that influences Israel's security.

And I think you know that Israel -- the funding for Israel is under a different sort of format, and that's the memorandum of understanding that was established in 2007. And so we have a written contract saying we will support Israel. That is not the same as the support for other countries. This year, in the coming year, the obligation that we signed is a little over $3 billion. And that, in the bill that we passed, is fully funded.

The other part, of course, has the funding and the support and the relationship with Israel's neighbors, particularly the Palestinian Authority. There are two types of funding. One is for security and one is economic support. The security is for the security and the stability for Israel and the Palestinians. So when we're talking that that funding, it affects both the Israelis and the Palestinians.

The other type of funding is economic funding. That's primarily humanitarian programs, and some goes for meeting the payroll for Fayyad. And that was one of the discussions that I had to -- for an understanding there. Some of that funding was held when the Palestinians went to -- they were going to the U.N. for statehood.

There are several things that have affected our relationship and our funding with the Palestinians. One is the talk about the unity government with Hamas. Hamas is a terrorist organization in our definition. That affects the funding and stops the funding. The other of course is the attempt to go to the U.N. for recognition.

And the other type of funding is the funding for the U.N. when it prohibits the United States from giving money to the United Nations or specialized agencies if they recognize the Palestinians in that status. So that has become something that's been going on as we build our bill and affects -- as I say, affects the Palestinians, affects Israel and all of the other neighbors.

The other one that's been the most problematic is Egypt. And I went most recently in April. I had worked with General Tantawi in his previous position in defense for some time, so I knew him. And the important thing to be was a face-to-face discussion about keeping the treaty, the peace treaty, with Israel.

And that's a continuing conversation. What's difficult for us as we're putting a bill together and say we will continue that relationship and the funding with Egypt is who's it going to be? Who are we going to be working with? Who will provide the oversight? You know, what's that relationship going to look like?

One of the things that was the most important thing to me when I went to Israel in April is to meet with those who were actively involved in the uprising. And I did meet with about 30 that were very involved, and came back with a message of concern because what I heard from those that were so involved was sort of an attitude, well, of we didn't expect to get what we got in that we got rid of Mubarak, so everything is going to be good and the United States is going to come with great investment and we're going to have jobs and education.

That, I'd say, rather naïve expectation concerns me when it doesn't -- when it's not true; when those jobs are not there and when that investment is not there. So I'm very concerned about that and we need to watch very carefully and keep the best relationship we possibly can.

The money provided to Egypt comes from the Camp David Accords, but there are certain restrictions on that funding for Egypt. One is the keeping the treaty with Israel, and that's why I went to ask the question. The other is the requirement to continue to dismantle the smuggling tunnels. And also, we have a restriction if the Egyptian government is controlled by terrorist organizations, and that's why of course we're all watching those elections.

The other neighbors are neighbors like Jordan, which has been a moderating influence in the Middle East. I have had a very good relationship with Jordan because when I was so involved with the Iraqi women and working in Iraq, when it was too dangerous to meet in Iraq, Jordan allowed us to meet there. And so the relationship has been very good, and we want to keep that relationship with Jordan.

Jordan and Egypt both have been, in the past, very helpful in keeping the fairly peaceful relationship. Turkey, the same thing. I'm the co-chair and was one of the founders of the Turkey Caucus. I'm concerned about what Turkey -- what's happening there. But, again, it's very, very important to the entire region.

So that's just kind of my opening remarks of what I've been involved in.

MOSSETIG: You've met a number of times with the Israeli leadership. To what extend do they recognize how totally different their strategic situation is now as a result of the changes in the neighborhood? And how did they talk to you in terms of how they planned to deal with it?

GRANGER: They're very aware. It's a very -- I think it's a very dangerous time for Israel. Things have changed and continue to change. The threat for Iran, which I didn't mention, of course which, you know, overshadows everything, is of great concern to Israel.

And so, keeping their -- keeping their position strong and saying, this is what we stand for, is extremely important. I talk to them on a very regular basis, but in this whole situation with withholding the money from the Palestinian Authority, trying to be influential in getting them to go back to the peace table and to not take that position, again, I've talked to the Israelis and they're very aware.

In releasing some of the funding that was being held that was the security money, the Israelis said, we want you to do this; it's part of our security as well as the Palestinians. And so there's been a constant conversation.

MOSSETIG: Do you -- I mean, I guess no one really knows who's going to quite come out on top in Egypt. They're going through the succession of elections, which are going to go on until March. The early returns are showing strength, A, for the Muslim Brotherhood and also for a group that makes the Muslim Brotherhood look even more moderate, the Salafists.

Do you get any sense that the Israelis have any idea how to reach out or be in touch with -- whether they feel it's even possible to do any kind of business with these folks?

GRANGER: They do think it's possible, and they believe -- the relationships from the Israelis to the Egyptians, they're very aware of it and they're working to continue relationships and have an outreach.

Here's the concern I have -- and I hear it more from the Arab states -- and they said, you know, from the United States, you turned your back on Mubarak so quickly. This was someone that we had supported and had a very strong relationship. The United States turned their back on Mubarak. Now, just recently, you seem to be turning your back -- meaning the United States -- on the military.

Well, during the Arab Spring when none of us really were aware of what was going to happen, the strongest relationship we had was military to military because we've trained so much of the Egyptian military, they use our equipment; and said, now are you going to turn you back on the military, because the administration said turn over to civilian control so fast. And it has created as many problems for us, I think, in the United States as it certainly has for Israel.

MOSSETIG: Because those are people we knew how to deal with, did you get any sense either from the Israeli leadership or American leadership that they had any idea, particularly in the early stages, of this revolution, that it could lead to this possible outcome, or --

GRANGER: Some. And when I was in Egypt, and even when I had met with some of those who were involved who came to the United States and were asking to use your influence so that the elections will not come so quickly that we won't have time to have any kind of organization. They said repeatedly, refer to it as an uprising, not a revolution. It's an uprising. So I'm very careful about that.

MOSSETIG: Now, in your talks with people like General Tantawi, what kind of feeling do you get about how ready they are at a given moment -- and of course now the pressure increases by the week -- to step aside and turn over authority to a genuinely civilian government?

GRANGER: When I met in the spring they were very ready. As this has progressed, Tantawi, certainly and the military, want to have a part. They've had a very, very strong part in -- you remember of course, when the uprising occurred it was the military, established military, that kept it from becoming violent, and said, we will not fire on our own people. So they have been a stabilizing influence in Egypt and want to continue that.

MOSSETIG: Now, you were also in Ramallah, as you said, talking to Prime Minister Fayyad. To what extent do you get the feeling that they really feel in control of the situation versus the extent to which they figure they could be tossed out by Hamas?

GRANGER: They wouldn't be completely frank with me on that. There's not enough trust there for that. But Fayyad is playing a very important role and he, I think, is a very positive influence on moving forward.

And one of the things -- when I talked to him I said, I just want to make sure that you understand where we are and what restrictions we have on funding. But I do think he has been a much more positive influence and I hope that he stays involved. He has very strong support but he is a more moderate voice.

MOSSETIG: Do you sense that the statehood drive within the Palestinians is as strong as it was, or is it losing a bit of steam?

GRANGER: There's a moratorium right now, and that's one of the reasons that we were able to release some of the money that was being held back, because they said as they went through UNESCO -- and there was such a flap over that, and it's so serious because of our laws and our restrictions on funding that when they said, we will hold back and not go to another agency until we reconsider after the first of the year, then -- I think it is still strong.

But there was a sense of reality of, this is what happens to us, including what, I say, our restrictions on funding those agencies and what happens to our funding for the United Nations if those agencies take the position that UNESCO takes.

MOSSETIG: The foreign aid bill is going to eventually go to a conference. The House basically wanted to bring it down from the administration request of 59 (billion dollars) overall to 47 (billion dollars). At this stage in the game are you ready to predict what the number is going to come out at?

GRANGER: No -- (chuckles) -- not in this audience. (Laughter.) But I'll tell you that I met with Senator Leahy, and our staffs have been working together, and so I'm hopeful that we are going to come to a -- not just a number but an understanding and agreement on some of the major issues.

You know, I know everybody in this room knows that foreign aid is just not the most popular funding, and so it's a very difficult issue. It's difficult back home, it's difficult with the members, not just to come to a number but an agreement that really is in our national security interest.

As I said, you know, my background is national security and defense, so I see things through that prism. So, in putting our bill together in the House I said, what is in our national security interest? And that was the most important -- that's what we refer to as OCO (ph). But the bill says, what is in our national security interest -- and that's Iraq, Afghanistan, Pakistan if there's funding there, Israel, Mexico -- and look at that first and then say, what is important as we are part of this world in our humanitarian efforts, having to do with the Global Fund, that sort of thing, and explain that and put that together.

And then we also looked at, you know, what are programs where we've funded in the past and the money is still sitting in a pipeline, hasn't been used for several years, or we can't afford that? So, in looking at what the -- funding less money, then what can we do that causes the least harm internationally and also supports particularly the transition from defense to State Department as we leave Iraq to make sure that people understand that we're leaving the State Department there in big numbers?

As we're going to leave Afghanistan, we're going to leave State Department in big numbers. How do we make sure we provide for their security? How do we make sure that the projects that we started can be completed and sustained? So that is more important to me than just to come with a number.

MOSSETIG: Well, I think we're at the time where we invite the membership for questions. I will do the usual moderator's admonition here. We want good, crisp questions. We do not want statements or speeches, and if you go in that direction I'm going to cut you off.

Back in the back. Tom?

QUESTIONER: Good morning. Tom Dine. Sorry to be late, but Washington melts down during a rainstorm.

I don't know if you covered this in the beginning, but you just said foreign aid is not a popular issue. It's never been a popular issue, although it's never defeated any candidate that I'm aware of around the country.

Under the circumstances -- and you've got a tough job, and obviously, from what I'm listening to, you're quite savvy and you understand the importance of it to the national interest.

And then a week-and-a-half ago at a Republican debate, your Governor Romney and Newt Gingrich said we ought to eliminate foreign aid and go back to go, which I -- you know, people have uttered those words over the decades and it's never happened. Zero-based budgeting has never happened in this city anywhere.

Did that "debate," quote, unquote, make your job tougher? And how do you get around that kind of anti-foreign-aid talk, because it isn't in our national interest to eliminate foreign aid.

GRANGER: I'll say I am disappointed and concerned that the presidential candidates don't stand up for our national security interests and say that they have an understanding of why it's important.

For instance -- I'll use Mexico -- that, you know, our neighbor -- I don't want to oversimplify but I say, you know, I want my neighbor in my neighborhood to be safe. I want them to keep their home up. I want them to, you know, keep up the neighborhood and be prosperous. And if they fall behind, I want to help them. And that's the way we should feel about Mexico.

So when I -- there's two issues, or two positions, is if you say, no, we should have no foreign aid, then I'll argue that night and day. Or if you say -- and this is the other one I hear -- it should only be Israel, then I say, what are you going to do about Mexico? What are you going to do about our interests in Afghanistan and Iraq and what we've gone through for 10 years?

And so, I don't agree with that position and I think there are more of us who should stand up and use it as our responsibility to educate people.

MOSSETIG: And I want to interject that I and a lot of my colleagues feel somewhat chagrined that one of the worst wars in the world is going on right next door to the United States. And unless you live in your part of the country, most Americans are totally oblivious. And part of that's our fault because we're just not giving it the coverage we should, and they're going to be doing a presidential campaign in the midst of gunfire.

GRANGER: And I'll add that, yes, but also there's a great deal that's going on in Mexico that is good. And they are a very strong economic partner with the United States. Certainly those of us in Texas are aware of that, but a very strong economic partner. And there is a great deal that happens in Mexico that's very important to us.

I just returned from Mexico. I was there -- actually, I came back on Sunday night, and there's investment -- for every dollar we put in Mexico that we add to their fight against the drug cartels, they're putting up 12 (dollars). And so they're looking at it both what's happening today and what's happening long term, and some of that has to do with their justice system.

So I'll stand up and speak, and I wish we would give it more attention, but also give attention to the progress that's being made.

MOSSETIG: This gentleman.

QUESTIONER: Jonathan Brown, Georgetown University. In regards to terrorist organizations in the Egyptian government, potentially, what organ of the U.S. government -- or how do you make a designation of a group is terrorist or not?

GRANGER: There is a definition -- and the Muslim Brotherhood is what, of course, we have been watching so carefully -- and that designation, that definition is long term. We've got a real problem in that our current law says we can't give funding where -- and the only thing that gets sort of muddy is what we say is control. Is it a percentage? Is it a -- you know, it is the statements or mission they have.

So, particularly in Egypt we've got problems as we're watching that. It looks like between 62 and 65 percent is going to the Muslim Brotherhood and Salam (ph).

MOSSETIG: Susan?

QUESTIONER: Hi. Susan Cornwell with Reuters.

I wondered how much aid to the Palestinians you still have a hold on. I was thinking it might be about 160 million (dollars), but -- and I wondered what the conditions are on that. When could that hold be lifted? Is that also linked to the U.N. issue or to something else?

GRANGER: It is linked to the U.N. because what we've said: If the Palestinians -- if the Palestinians went to the United Nations, it means they walked away from the negotiating table. That's what changed the funding. It's not that high. We released 40 million (dollars), so it's at about 140 million (dollars) -- I'm sorry; I can get you the exact number -- part of that being economic and part security. The hold right now is security.

And what we've said is -- the way it was written says when the Palestinians -- and it was unclear what action had to occur -- was it when they were given recognition or when they applied for recognition? And so what we're trying to be is very supportive and saying, you made this attempt, but if we really -- we're actually using that hopefully as a tool to influence them to go back to the security table.

So we could release more. Part of it comes from the authorizers. They're holding part of it. And part of it comes from our subcommittee.

MOSSETIG: The gentleman over there.

QUESTIONER: Tom Miller, International Executive Service Corps. I actually have two questions, if I may.

First of all, I applaud you. You're one of the few people I've ever heard stand up and say, they weren't being frank with me. Most of your colleagues say, they looked into my eyes and -- (laughter).

My two questions are this: First of all, you referred to the polls that have been going on for decades about American perceptions of foreign aid. Do you have any thoughts -- and this is -- I used to work at the State Department. We heard this when I first came in 35 years ago. Nothing has changed. Is there any way to change this in this country? It doesn't seem like it should be that hard.

The second question is Lebanon, and going back to your comment about degree of involvement. And if you could say a word about Hezbollah's involvement in the government and how that impacts on our willingness to help them out.

GRANGER: Hezbollah is also -- we recognize it as a terrorist organization, so we can't give funding. It is the law. On changing it, I don't know how you change that except it shouldn't stop anyone from speaking up.

When I was asked to take this subcommittee, then -- I was not asked, will you speak up for our foreign assistance; I knew that was part of it, and that was something that I would do anyway. But, again, I'm going to go back to those who are in a position -- they should stand up. They should understand -- they should recognize that they should speak up for it.

It doesn't mean that we don't have restrictions and that we don't have better oversight. And part of the bill that passed the House subcommittee said there will be restrictions. We will not just say, we'll fund -- particularly in this changing world -- we won't fund regardless, but in many cases it says the secretary of state must certify that the following is occurring before money can be released.

And so we put restrictions on that, you know, I hope will make it to the final bill. The Senate didn't have a lot of those restrictions, but we put stronger oversight, stronger restrictions but still said, this is in our national security interest to do this.

And the other thing is some organizations -- part of course -- it's not foreign aid; it just means funding to government, government to government. We put restrictions on that and we essentially said in that government -- are there institutions in this government and country that can -- we say, we want to do this program; can they provide the oversight?

So a lot of that is the help there that's going to be very important. I hope those restrictions say there'll be more support if there's better oversight and restriction.

MOSSETIG: The gentleman back there.

QUESTIONER: My name is Peter Baumbusch. I'm a retired lawyer. By the way, I'm extremely impressed with your knowledge and ability to articulate these problems.

I get very confused about all that I hear about Israel, the peace process and so forth. And one of the issues that keeps coming up is the Israeli policy of funding and providing political support to the settlements. In your view, is that policy helping the peace process or hurting the peace process?

GRANGER: It's not helping it. The peace process -- oftentimes we say that we're really talking about a peace process that existed at one time. So it's not, what is the peace process right now? I thought when they stopped direct negotiations it was very harmful to the peace process. It became I don't think a real and productive peace process.

So I'm careful of talking about the peace process because I don't know what it is right now, and if I don't know what it is right now, I don't know who does. I think if we're going to be serious, then there have to be obligations and agreements from the Israelis and the Palestinians.

MOSSETIG: Do you think it's possible that it can gain any momentum in this atmosphere of total uncertainty?

GRANGER: If we took a stronger stance in the United States -- we've always been -- you know, well, you bring people to the table, and we're not bringing people to the table right now.

I'm going to tell you, in August I had a conversation that was very important, and it was from a high government official in Israel that is very well thought of and very popular. And he said, Kay, he said, are you aware and do you recognize that the United States is viewed by the Arab states and by Europe as being officially neutral on Israel today? That's a pretty stunning statement, and I had to think through it.

He said, because of the relationship that has been publicized between President Obama and Prime Minister Netanyahu, we think that people view it as they just don't get along. He said, it is viewed by the Arab states and Europe as the United States is now neutral on Israel. With the changes that are occurring today, that means that countries are empowered and emboldened to take positions they would never take -- never take if the United States still views Israel as their ally and Israel's protector.

That's a very, very serious and game-changing situation. We were always viewed as those who bring people to -- bring them to the peace table. It's a very different position.

MOSSETIG: Yes?

QUESTIONER: Sandy Brita-Jones (ph) with the State Department. Thank you so much for your comments. I wanted to ask you the implications of the economic -- the austere budget environment that we're in on security issues.

You had mentioned, when we were looking at the budget moving forward, Afghanistan, Pakistan, Iraq, Israel, Mexico. And in talking about Israel in the neighborhood, in the new neighborhood, I'm wondering about the new neighborhood and our support for what's happening in the "Arab spring." I've been spending the last week-and-a-half trying to figure out how to deal with the 20 percent reductions, 50 percent reductions that are coming back from the budget process.

And so my question is, when folks in the department, be it DOD or State or what have you -- and I'm in the Bureau of Democracy, Human Rights and Labor, and obviously that's very important in the Arab Spring context -- when we are faced with these restrictions, how do we deal with that, given all the big priorities and the implications of being supportive of the Arab Spring from a security perspective? What is your view on that?

GRANGER: It's very difficult. And your job is very hard in particularly in these times. And, believe me, I recognize that.

There is a mistake, I think, that's been made, and that's when we said -- and we do; we've overspent and we have to cut back. There's no doubt about it; it's a very strong message and people were watching very carefully.

So when we said we must cut back in everything except defense, we left out the understanding -- when I said we're talking about defense, we have to include state foreign operations because in the transitions in Iraq, defense did almost everything. And we said -- they were doing nation-building and things that the State Department had traditionally done.

When we turned our attention back to Afghanistan, there was a move to correct that. And so you know, of course, so much was transition from defense to State Department. But when people started saying, cut back but not in defense, they didn't recognize that transition and what we were asking the State Department to do.

And so I spoke over and over and said, you've got to -- we've got to understand and recognize that too because, again, if we move the military out, we're leaving State Department in there, unless we're going to leave altogether, which is not the plan and would not be the right decision.

So we've got to recognize that and fight for that kind of funding and transition. That's what the -- in the -- probably is going to be -- I don't know what we're calling it, what kind of bus we're calling it now, omnibus, minibus, all of that, but there is that set-aside that says, here's what we're not touching, and we've got to recognize what the State Department and civilians are doing in those countries and the security that needs to be provided for them.

QUESTIONER: Jim Landers, Dallas Morning News. President Obama said the other day that one of the great accomplishments of President George W. Bush was the PEPFAR program and what's happened in Africa. They're still talking ambitiously about, you know, the end of AIDS. President Bush is still out there working this issue himself.

Have you talked with President Bush about that aspect of our foreign aid budget, and do you have any hope that it's going to remain a big component of what we spend?

GRANGER: I certainly hope that it will remain. And I think that was one of the unrecognized achievements of President Bush. PEPFAR, Millennium Challenge, they were very, very important.

And I'm going to tell you as a Texas Republican, a friend to the president, until I came on that subcommittee I didn't understand the achievements that had been made. And now we put so much -- we were talking all about today about our foreign assistance the country is having primary to its security, but what we've done in health care, and our contribution of the United States, has been remarkable because the success is so remarkable.

And so it's not just people -- the president will make an announcement -- we're going to give 5 billion (dollars) here, 15 billion (dollars) there, but to understand what's happened with that money and the progress that has been made really is remarkable, and he certainly deserves a great deal of credit. And I believe that we'll pull that together and we'll be able to maintain that because we can show the results. We can show the results in infant mortality, maternal mortality. The significance of what we're doing with vaccines is amazing.

And one of the things that was important, and President Bush certainly recognized this and President Obama does, it's not just the U.S. government. It's the Gates Foundation, it's the ONE Campaign, all that we've put it together as well as a great deal of support from U.S. businesses that have been doing -- and have plants in countries that need that support. They have been wonderful in their support.

So I think there's still a great story that needs to be told about the success, and that's how we'll get the support.

MOSSETIG: David?

QUESTIONER: Thank you. David Short with FedEx. And I'd like to come back to the prospects for peace between the Israelis and Palestinians, specifically looking at the political situation on both sides, wherein Gaza, the Palestinians have chosen Hamas. On the Israeli side, through a democratic process they've put in a right-wing government. Are the people on both sides really prepared to make the hard choices, the hard compromises for peace?

GRANGER: I don't know that they are. I know that they're tired of being under attack. I mean, the stress of the living conditions is enormous.

When we were there in August, there was a woman that was scheduled to speak to us and tell us about what life was like. And her area was shelled literally two days before, so she agreed to speak. It was the most emotional thing that you can imagine as she says, you know, this is my life: I wake up, I try to get my 12-year-old to school and to soccer practice, and I'm going to work but, you know, do we need to go to the shelter today?

And she went back and forth about that, what it was like year after year and why the people -- the members of Congress there -- now, there were 27 freshman members of Congress that went to Israel to understand what we're dealing with there. And the question was, so, why don't you leave? But she said, this is my home. This is my home; this is my job. My parents are here.

But this is the reality of living under these conditions. I think that there is a time to say, that's not worth it. How can we really move toward a peaceful situation? One of the things that has been so helpful in our funding is not just the funding but the attention that's been given to the security part -- as I said, the Israelis and the Palestinians.

And so how do we -- so, if you see that our funding can help and our plan can help toward living together or close to each other but in a secure situation, that helps lead to peace. And that's a very important responsibility that we've taken on.

MOSSETIG: The gentleman in the back.

QUESTIONER: Ma'am, Jason Bartoleme (ph). I work in the office of Senator Orrin Hatch.

Ma'am, you were discussing a little bit about the priorities in our vital national interest, and I think some of the frustrations that we see is that foreign aid, it's hard to tie why our foreign aid is so important to our vital national interest. And this goes to our national security strategy.

So I guess my question to you, ma'am, is could you articulate, from where you sit, how comfortable you are with where we're going as a nation in our strategy, and if there are any -- if there are any things that we must do to be able to tie the linkage between foreign aid and our vital national interests -- because sometimes I think that's lost in the conversation -- and how that relates to what we're trying to accomplish in the Middle East. Thank you.

GRANGER: First of all, when you call me ma'am, I either know I taught you or you were in the military. (Laughter.) I don't think I taught you.

This is where I think it's going to happen. No, I don't think we're articulating the way we should. I don't think we're clear. I don't think we're clear in our intention so it's very hard to be clear in your message.

But after the supercommittee failed to come to -- to come up with a plan, now we're falling back into those cuts that are mandated. That's going to force us to say, what is really in our national security interest? What are we going to fund?

I hate for us to do it in a pressured we-have-to-do-it, but I think that may be the only way we say very clearly, this is in our national security interest and we must articulate that and have a foreign policy that people understand. They may not agree with it, but they understand where we are. I can't do that today.

MOSSETIG: Nostalgic for the days of the Cold War when it was a lot clearer.

GRANGER: It was clearer.

MOSSETIG: Sir?

QUESTIONER: Hi. Chuck Price (sp). Two questions, if I could. First, a little outside your AOR, but with respect to our expenditures on military national security, particularly overseas operations, I wonder if you had any thoughts about the bang for the buck that we got in the Libya operation where we leveraged use of air and naval capabilities that were unique to us in a NATO operation and got, you know, a result which was significant and less costly than other approaches.

And the second question is on Central America. You mentioned Mexico, and I wonder if you had any thoughts about significance to our national interest of the Central American countries.

GRANGER: Let me answer the second one first.

We did -- when we went into Iraq and Afghanistan -- or I should say Afghanistan and Iraq, we really took our eyes off the rest of the world in many ways. We were so focused on that. And so Central and South America, our neighbors -- I said, from our perspective and our bill and our funding, our attention, that will be a major focus.

That was why it was very important to me that the first trip that I -- congressional delegation that I led as the chairman, I said it will be South and Central America and we'll be back, and to make sure that we're paying attention and that we don't turn around one day and say, my gosh, we just lost. You know, what is the relationship? We're not paying attention.

And they said, are you going to come back? Is it the one-time thing? No, it's not a one-time thing. And so, to establish not only the relationships there but, you know, Congress to congress, Congress to parliament. So it's a continuing relationship and I think that is very important.

How much bang do we get for the buck? Let me tell you, we still are the greatest military in the world, in the history of the world, and our equipment is the best. Now, are we going to keep that? Are we going to make sure that -- well, we can't do that with 50 percent cuts.

But the other thing is -- and the criticism has been are we -- in this world, in this battle, are we still fighting the old battles? And we, at this time, have to reassess and say, do we have the equipment for the battles ahead, not the battles behind us? Do we have the equipment? Are we light? Are we flexible? Are we quick?

And that day, 9/11, when I was at the Pentagon, I was having breakfast with Donald Rumsfeld. There were eight of us that had been very involved in defense. And we were having a breakfast to talk about, do we have the military and the equipment for a world that's changing literally daily?

No one had any idea what was going to happen that day. It was never discussed. But the discussion was, how do we go forward? And we're meaner, leaner. We left and the whole world changed. So we've got to keep that in front of us and not just battle for this program or that program, but what keeps us safe, and also what keeps us as a leader in the world for those that we are also protecting so they have that equipment too.

MOSSETIG: I think we're just about wrapping up, and I'm going to take the prerogative of the chair and ask you a very Washington question.

2007 and '8 you endorsed and worked hard for Mitt Romney. So far in this cycle you've contributed to your governor. Whom and when are you going to endorse?

GRANGER: I will endorse and probably fairly soon. When I endorse, then you'll know who that is. (Laughter.)

MOSSETIG: Well, thank you very much --

GRANGER: Thank you.

MOSSETIG: -- for a very full, interesting presentation. I know you've got meetings on the Hill. Good luck. Thank you. (Applause.)

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THIS IS A RUSH TRANSCRIPT.-------------------------

MICHAEL MOSSETIG: I guess we can -- we can commence. Thank you all for coming. I'm Mike Mossetig, the foreign editor of the "PBS NewsHour," broadcast online. Just a couple little housekeeping matters: Please totally turn off all your electronic devices, and this meeting is totally on the record.

I do want to start by saying that I don't think we can let this particular morning go past unnoticed, that this is the 70th anniversary of the attack on Pearl Harbor. Twenty-four-hundred Americans died there and a nation was mobilized for war: 12 million in uniform, hundreds of thousands in the factories, millions who shopped with ration books for gas and groceries. And toddlers like us remember sticking the little stamps in the war bond books to help pay for the -- help pay for the war.

And that was a terrible day for the United States, and with our speaker, Congresswoman Granger, there's a connection to the next terrible day for the United States, that you were in the Pentagon in a meeting and had just left the building before the Pentagon was attacked on 9/11.

Ms. Granger is the former mayor of Fort Worth, Texas. And when she was thinking of running for Congress, both the Democrats and the Republicans wanted her as their candidate, which raises the question, with that kind of bipartisan reach and appeal, how do you survive in the current hyperpartisan atmosphere of Washington and the U.S. Congress?

You are now the chair of the Subcommittee on State and Foreign Operations of the Appropriations Committee, a member of a group that is known on Capitol Hill as the "College of Cardinals." Unlike the one in Rome, its membership includes both women and Protestants. (Laughter.)

You have made, in the course of just this year, two trips to the Middle East, and that region is erupting in the "Arab spring." You've been to Israel, Egypt and the West Bank.

You want to make a few opening remarks and then I will do a bit of a Q&A with you, and then at half hour -- at 9:00 we will put the questions to the audience. So please go ahead.

REPRESENTATIVE KAY GRANGER (R-TX): Thank you very much. Well, I'll address what you said about my support from Democrats and Republicans.

I was a Republican, but in Texas all municipal elections are nonpartisan and I was never involved in partisan politics until I ran for the Congress. So it's been an adjustment, needless to say.

I'm going to say that I'm very proud of the fact that the subcommittee that I chair -- Nita Lowey was the ranking member -- is the ranking member now. She was the chair when I came on as ranking member and we made a conscious decision to work together and work in a very bipartisan way that I've very proud of, and we continue to do that.

And so, in most cases I'm speaking both for Mrs. Lowey and for myself because we talk literally every day. We may disagree on numbers, funding amounts, but we very, very seldom disagree on policy. And we always check with each other.

Let me talk -- I'm supposed to talk about today about Israel and the Arab Spring and how that is changing things. And I'm going to say that we're in the process right now of finishing our bill to fund foreign aid and our assistance with other countries, and that consumes our time, and it's a time when things are changing.

And you all know in this room, they're changing almost daily, so we're trying to sort of have a crystal ball, and then as much experience and information as we possibly can to see what's going to happen, and to make -- to protect our interests -- our national security interests as we go forward.

I've spent almost all of my congressional career -- I'm in my eighth session of Congress -- in some form of national security and defense. I was on the Armed Services when I came into Congress in my second session, and I was named to Appropriations and served on Military Construction and now Defense Appropriations, and that's where I've been, and then added State Foreign Operations. So I see things through a prism of national security.

As we're putting this together, there are many tricky things. One is just the legislative process and how things are very difficult right now, and I think you're all aware of that, and the gridlock in Washington and the enormous partisanship in Washington.

The other thing is the perception of foreign aid, and that is a perception from our constituents, and a lot of the members of Congress will come in and say, why should we be giving our money to any foreign country, particularly those who don't support us? And the perception is -- I think you all know this -- that it's between 20 and 30 percent of our expenditures when it's actually 1 percent.

So I spend a lot of my time -- and I know Nita Lowey does the same thing -- of bringing people together and say, no, this is why we do this; this is what is in our national security interest as well as our obligation as a country that cares, and our humanitarian interests.

Let's go particularly to Israel. I've been to Israel now five times, twice this year. As you said, I went in the spring and then I went again in August. And what I do, I meet with Prime Minister Netanyahu, Defense Minister Barak, and in the case of August, with Prime Minister Fayyad, to listen; to also say, in a very clear way, this is where we stand.

I think you know there's strong support for Israel on both sides of the aisle. There is strong support for Israel from the freshmen who came in. And Eric Cantor and I were both on a trip with freshmen in August, two different trips that Eric put together, bringing the freshmen to Israel to understand our support in what's going on there, as well as understand how the neighbors of Israel and our support -- how that influences Israel's security.

And I think you know that Israel -- the funding for Israel is under a different sort of format, and that's the memorandum of understanding that was established in 2007. And so we have a written contract saying we will support Israel. That is not the same as the support for other countries. This year, in the coming year, the obligation that we signed is a little over $3 billion. And that, in the bill that we passed, is fully funded.

The other part, of course, has the funding and the support and the relationship with Israel's neighbors, particularly the Palestinian Authority. There are two types of funding. One is for security and one is economic support. The security is for the security and the stability for Israel and the Palestinians. So when we're talking that that funding, it affects both the Israelis and the Palestinians.

The other type of funding is economic funding. That's primarily humanitarian programs, and some goes for meeting the payroll for Fayyad. And that was one of the discussions that I had to -- for an understanding there. Some of that funding was held when the Palestinians went to -- they were going to the U.N. for statehood.

There are several things that have affected our relationship and our funding with the Palestinians. One is the talk about the unity government with Hamas. Hamas is a terrorist organization in our definition. That affects the funding and stops the funding. The other of course is the attempt to go to the U.N. for recognition.

And the other type of funding is the funding for the U.N. when it prohibits the United States from giving money to the United Nations or specialized agencies if they recognize the Palestinians in that status. So that has become something that's been going on as we build our bill and affects -- as I say, affects the Palestinians, affects Israel and all of the other neighbors.

The other one that's been the most problematic is Egypt. And I went most recently in April. I had worked with General Tantawi in his previous position in defense for some time, so I knew him. And the important thing to be was a face-to-face discussion about keeping the treaty, the peace treaty, with Israel.

And that's a continuing conversation. What's difficult for us as we're putting a bill together and say we will continue that relationship and the funding with Egypt is who's it going to be? Who are we going to be working with? Who will provide the oversight? You know, what's that relationship going to look like?

One of the things that was the most important thing to me when I went to Israel in April is to meet with those who were actively involved in the uprising. And I did meet with about 30 that were very involved, and came back with a message of concern because what I heard from those that were so involved was sort of an attitude, well, of we didn't expect to get what we got in that we got rid of Mubarak, so everything is going to be good and the United States is going to come with great investment and we're going to have jobs and education.

That, I'd say, rather naïve expectation concerns me when it doesn't -- when it's not true; when those jobs are not there and when that investment is not there. So I'm very concerned about that and we need to watch very carefully and keep the best relationship we possibly can.

The money provided to Egypt comes from the Camp David Accords, but there are certain restrictions on that funding for Egypt. One is the keeping the treaty with Israel, and that's why I went to ask the question. The other is the requirement to continue to dismantle the smuggling tunnels. And also, we have a restriction if the Egyptian government is controlled by terrorist organizations, and that's why of course we're all watching those elections.

The other neighbors are neighbors like Jordan, which has been a moderating influence in the Middle East. I have had a very good relationship with Jordan because when I was so involved with the Iraqi women and working in Iraq, when it was too dangerous to meet in Iraq, Jordan allowed us to meet there. And so the relationship has been very good, and we want to keep that relationship with Jordan.

Jordan and Egypt both have been, in the past, very helpful in keeping the fairly peaceful relationship. Turkey, the same thing. I'm the co-chair and was one of the founders of the Turkey Caucus. I'm concerned about what Turkey -- what's happening there. But, again, it's very, very important to the entire region.

So that's just kind of my opening remarks of what I've been involved in.

MOSSETIG: You've met a number of times with the Israeli leadership. To what extend do they recognize how totally different their strategic situation is now as a result of the changes in the neighborhood? And how did they talk to you in terms of how they planned to deal with it?

GRANGER: They're very aware. It's a very -- I think it's a very dangerous time for Israel. Things have changed and continue to change. The threat for Iran, which I didn't mention, of course which, you know, overshadows everything, is of great concern to Israel.

And so, keeping their -- keeping their position strong and saying, this is what we stand for, is extremely important. I talk to them on a very regular basis, but in this whole situation with withholding the money from the Palestinian Authority, trying to be influential in getting them to go back to the peace table and to not take that position, again, I've talked to the Israelis and they're very aware.

In releasing some of the funding that was being held that was the security money, the Israelis said, we want you to do this; it's part of our security as well as the Palestinians. And so there's been a constant conversation.

MOSSETIG: Do you -- I mean, I guess no one really knows who's going to quite come out on top in Egypt. They're going through the succession of elections, which are going to go on until March. The early returns are showing strength, A, for the Muslim Brotherhood and also for a group that makes the Muslim Brotherhood look even more moderate, the Salafists.

Do you get any sense that the Israelis have any idea how to reach out or be in touch with -- whether they feel it's even possible to do any kind of business with these folks?

GRANGER: They do think it's possible, and they believe -- the relationships from the Israelis to the Egyptians, they're very aware of it and they're working to continue relationships and have an outreach.

Here's the concern I have -- and I hear it more from the Arab states -- and they said, you know, from the United States, you turned your back on Mubarak so quickly. This was someone that we had supported and had a very strong relationship. The United States turned their back on Mubarak. Now, just recently, you seem to be turning your back -- meaning the United States -- on the military.

Well, during the Arab Spring when none of us really were aware of what was going to happen, the strongest relationship we had was military to military because we've trained so much of the Egyptian military, they use our equipment; and said, now are you going to turn you back on the military, because the administration said turn over to civilian control so fast. And it has created as many problems for us, I think, in the United States as it certainly has for Israel.

MOSSETIG: Because those are people we knew how to deal with, did you get any sense either from the Israeli leadership or American leadership that they had any idea, particularly in the early stages, of this revolution, that it could lead to this possible outcome, or --

GRANGER: Some. And when I was in Egypt, and even when I had met with some of those who were involved who came to the United States and were asking to use your influence so that the elections will not come so quickly that we won't have time to have any kind of organization. They said repeatedly, refer to it as an uprising, not a revolution. It's an uprising. So I'm very careful about that.

MOSSETIG: Now, in your talks with people like General Tantawi, what kind of feeling do you get about how ready they are at a given moment -- and of course now the pressure increases by the week -- to step aside and turn over authority to a genuinely civilian government?

GRANGER: When I met in the spring they were very ready. As this has progressed, Tantawi, certainly and the military, want to have a part. They've had a very, very strong part in -- you remember of course, when the uprising occurred it was the military, established military, that kept it from becoming violent, and said, we will not fire on our own people. So they have been a stabilizing influence in Egypt and want to continue that.

MOSSETIG: Now, you were also in Ramallah, as you said, talking to Prime Minister Fayyad. To what extent do you get the feeling that they really feel in control of the situation versus the extent to which they figure they could be tossed out by Hamas?

GRANGER: They wouldn't be completely frank with me on that. There's not enough trust there for that. But Fayyad is playing a very important role and he, I think, is a very positive influence on moving forward.

And one of the things -- when I talked to him I said, I just want to make sure that you understand where we are and what restrictions we have on funding. But I do think he has been a much more positive influence and I hope that he stays involved. He has very strong support but he is a more moderate voice.

MOSSETIG: Do you sense that the statehood drive within the Palestinians is as strong as it was, or is it losing a bit of steam?

GRANGER: There's a moratorium right now, and that's one of the reasons that we were able to release some of the money that was being held back, because they said as they went through UNESCO -- and there was such a flap over that, and it's so serious because of our laws and our restrictions on funding that when they said, we will hold back and not go to another agency until we reconsider after the first of the year, then -- I think it is still strong.

But there was a sense of reality of, this is what happens to us, including what, I say, our restrictions on funding those agencies and what happens to our funding for the United Nations if those agencies take the position that UNESCO takes.

MOSSETIG: The foreign aid bill is going to eventually go to a conference. The House basically wanted to bring it down from the administration request of 59 (billion dollars) overall to 47 (billion dollars). At this stage in the game are you ready to predict what the number is going to come out at?

GRANGER: No -- (chuckles) -- not in this audience. (Laughter.) But I'll tell you that I met with Senator Leahy, and our staffs have been working together, and so I'm hopeful that we are going to come to a -- not just a number but an understanding and agreement on some of the major issues.

You know, I know everybody in this room knows that foreign aid is just not the most popular funding, and so it's a very difficult issue. It's difficult back home, it's difficult with the members, not just to come to a number but an agreement that really is in our national security interest.

As I said, you know, my background is national security and defense, so I see things through that prism. So, in putting our bill together in the House I said, what is in our national security interest? And that was the most important -- that's what we refer to as OCO (ph). But the bill says, what is in our national security interest -- and that's Iraq, Afghanistan, Pakistan if there's funding there, Israel, Mexico -- and look at that first and then say, what is important as we are part of this world in our humanitarian efforts, having to do with the Global Fund, that sort of thing, and explain that and put that together.

And then we also looked at, you know, what are programs where we've funded in the past and the money is still sitting in a pipeline, hasn't been used for several years, or we can't afford that? So, in looking at what the -- funding less money, then what can we do that causes the least harm internationally and also supports particularly the transition from defense to State Department as we leave Iraq to make sure that people understand that we're leaving the State Department there in big numbers?

As we're going to leave Afghanistan, we're going to leave State Department in big numbers. How do we make sure we provide for their security? How do we make sure that the projects that we started can be completed and sustained? So that is more important to me than just to come with a number.

MOSSETIG: Well, I think we're at the time where we invite the membership for questions. I will do the usual moderator's admonition here. We want good, crisp questions. We do not want statements or speeches, and if you go in that direction I'm going to cut you off.

Back in the back. Tom?

QUESTIONER: Good morning. Tom Dine. Sorry to be late, but Washington melts down during a rainstorm.

I don't know if you covered this in the beginning, but you just said foreign aid is not a popular issue. It's never been a popular issue, although it's never defeated any candidate that I'm aware of around the country.

Under the circumstances -- and you've got a tough job, and obviously, from what I'm listening to, you're quite savvy and you understand the importance of it to the national interest.

And then a week-and-a-half ago at a Republican debate, your Governor Romney and Newt Gingrich said we ought to eliminate foreign aid and go back to go, which I -- you know, people have uttered those words over the decades and it's never happened. Zero-based budgeting has never happened in this city anywhere.

Did that "debate," quote, unquote, make your job tougher? And how do you get around that kind of anti-foreign-aid talk, because it isn't in our national interest to eliminate foreign aid.

GRANGER: I'll say I am disappointed and concerned that the presidential candidates don't stand up for our national security interests and say that they have an understanding of why it's important.

For instance -- I'll use Mexico -- that, you know, our neighbor -- I don't want to oversimplify but I say, you know, I want my neighbor in my neighborhood to be safe. I want them to keep their home up. I want them to, you know, keep up the neighborhood and be prosperous. And if they fall behind, I want to help them. And that's the way we should feel about Mexico.

So when I -- there's two issues, or two positions, is if you say, no, we should have no foreign aid, then I'll argue that night and day. Or if you say -- and this is the other one I hear -- it should only be Israel, then I say, what are you going to do about Mexico? What are you going to do about our interests in Afghanistan and Iraq and what we've gone through for 10 years?

And so, I don't agree with that position and I think there are more of us who should stand up and use it as our responsibility to educate people.

MOSSETIG: And I want to interject that I and a lot of my colleagues feel somewhat chagrined that one of the worst wars in the world is going on right next door to the United States. And unless you live in your part of the country, most Americans are totally oblivious. And part of that's our fault because we're just not giving it the coverage we should, and they're going to be doing a presidential campaign in the midst of gunfire.

GRANGER: And I'll add that, yes, but also there's a great deal that's going on in Mexico that is good. And they are a very strong economic partner with the United States. Certainly those of us in Texas are aware of that, but a very strong economic partner. And there is a great deal that happens in Mexico that's very important to us.

I just returned from Mexico. I was there -- actually, I came back on Sunday night, and there's investment -- for every dollar we put in Mexico that we add to their fight against the drug cartels, they're putting up 12 (dollars). And so they're looking at it both what's happening today and what's happening long term, and some of that has to do with their justice system.

So I'll stand up and speak, and I wish we would give it more attention, but also give attention to the progress that's being made.

MOSSETIG: This gentleman.

QUESTIONER: Jonathan Brown, Georgetown University. In regards to terrorist organizations in the Egyptian government, potentially, what organ of the U.S. government -- or how do you make a designation of a group is terrorist or not?

GRANGER: There is a definition -- and the Muslim Brotherhood is what, of course, we have been watching so carefully -- and that designation, that definition is long term. We've got a real problem in that our current law says we can't give funding where -- and the only thing that gets sort of muddy is what we say is control. Is it a percentage? Is it a -- you know, it is the statements or mission they have.

So, particularly in Egypt we've got problems as we're watching that. It looks like between 62 and 65 percent is going to the Muslim Brotherhood and Salam (ph).

MOSSETIG: Susan?

QUESTIONER: Hi. Susan Cornwell with Reuters.

I wondered how much aid to the Palestinians you still have a hold on. I was thinking it might be about 160 million (dollars), but -- and I wondered what the conditions are on that. When could that hold be lifted? Is that also linked to the U.N. issue or to something else?

GRANGER: It is linked to the U.N. because what we've said: If the Palestinians -- if the Palestinians went to the United Nations, it means they walked away from the negotiating table. That's what changed the funding. It's not that high. We released 40 million (dollars), so it's at about 140 million (dollars) -- I'm sorry; I can get you the exact number -- part of that being economic and part security. The hold right now is security.

And what we've said is -- the way it was written says when the Palestinians -- and it was unclear what action had to occur -- was it when they were given recognition or when they applied for recognition? And so what we're trying to be is very supportive and saying, you made this attempt, but if we really -- we're actually using that hopefully as a tool to influence them to go back to the security table.

So we could release more. Part of it comes from the authorizers. They're holding part of it. And part of it comes from our subcommittee.

MOSSETIG: The gentleman over there.

QUESTIONER: Tom Miller, International Executive Service Corps. I actually have two questions, if I may.

First of all, I applaud you. You're one of the few people I've ever heard stand up and say, they weren't being frank with me. Most of your colleagues say, they looked into my eyes and -- (laughter).

My two questions are this: First of all, you referred to the polls that have been going on for decades about American perceptions of foreign aid. Do you have any thoughts -- and this is -- I used to work at the State Department. We heard this when I first came in 35 years ago. Nothing has changed. Is there any way to change this in this country? It doesn't seem like it should be that hard.

The second question is Lebanon, and going back to your comment about degree of involvement. And if you could say a word about Hezbollah's involvement in the government and how that impacts on our willingness to help them out.

GRANGER: Hezbollah is also -- we recognize it as a terrorist organization, so we can't give funding. It is the law. On changing it, I don't know how you change that except it shouldn't stop anyone from speaking up.

When I was asked to take this subcommittee, then -- I was not asked, will you speak up for our foreign assistance; I knew that was part of it, and that was something that I would do anyway. But, again, I'm going to go back to those who are in a position -- they should stand up. They should understand -- they should recognize that they should speak up for it.

It doesn't mean that we don't have restrictions and that we don't have better oversight. And part of the bill that passed the House subcommittee said there will be restrictions. We will not just say, we'll fund -- particularly in this changing world -- we won't fund regardless, but in many cases it says the secretary of state must certify that the following is occurring before money can be released.

And so we put restrictions on that, you know, I hope will make it to the final bill. The Senate didn't have a lot of those restrictions, but we put stronger oversight, stronger restrictions but still said, this is in our national security interest to do this.

And the other thing is some organizations -- part of course -- it's not foreign aid; it just means funding to government, government to government. We put restrictions on that and we essentially said in that government -- are there institutions in this government and country that can -- we say, we want to do this program; can they provide the oversight?

So a lot of that is the help there that's going to be very important. I hope those restrictions say there'll be more support if there's better oversight and restriction.

MOSSETIG: The gentleman back there.

QUESTIONER: My name is Peter Baumbusch. I'm a retired lawyer. By the way, I'm extremely impressed with your knowledge and ability to articulate these problems.

I get very confused about all that I hear about Israel, the peace process and so forth. And one of the issues that keeps coming up is the Israeli policy of funding and providing political support to the settlements. In your view, is that policy helping the peace process or hurting the peace process?

GRANGER: It's not helping it. The peace process -- oftentimes we say that we're really talking about a peace process that existed at one time. So it's not, what is the peace process right now? I thought when they stopped direct negotiations it was very harmful to the peace process. It became I don't think a real and productive peace process.

So I'm careful of talking about the peace process because I don't know what it is right now, and if I don't know what it is right now, I don't know who does. I think if we're going to be serious, then there have to be obligations and agreements from the Israelis and the Palestinians.

MOSSETIG: Do you think it's possible that it can gain any momentum in this atmosphere of total uncertainty?

GRANGER: If we took a stronger stance in the United States -- we've always been -- you know, well, you bring people to the table, and we're not bringing people to the table right now.

I'm going to tell you, in August I had a conversation that was very important, and it was from a high government official in Israel that is very well thought of and very popular. And he said, Kay, he said, are you aware and do you recognize that the United States is viewed by the Arab states and by Europe as being officially neutral on Israel today? That's a pretty stunning statement, and I had to think through it.

He said, because of the relationship that has been publicized between President Obama and Prime Minister Netanyahu, we think that people view it as they just don't get along. He said, it is viewed by the Arab states and Europe as the United States is now neutral on Israel. With the changes that are occurring today, that means that countries are empowered and emboldened to take positions they would never take -- never take if the United States still views Israel as their ally and Israel's protector.

That's a very, very serious and game-changing situation. We were always viewed as those who bring people to -- bring them to the peace table. It's a very different position.

MOSSETIG: Yes?

QUESTIONER: Sandy Brita-Jones (ph) with the State Department. Thank you so much for your comments. I wanted to ask you the implications of the economic -- the austere budget environment that we're in on security issues.

You had mentioned, when we were looking at the budget moving forward, Afghanistan, Pakistan, Iraq, Israel, Mexico. And in talking about Israel in the neighborhood, in the new neighborhood, I'm wondering about the new neighborhood and our support for what's happening in the "Arab spring." I've been spending the last week-and-a-half trying to figure out how to deal with the 20 percent reductions, 50 percent reductions that are coming back from the budget process.

And so my question is, when folks in the department, be it DOD or State or what have you -- and I'm in the Bureau of Democracy, Human Rights and Labor, and obviously that's very important in the Arab Spring context -- when we are faced with these restrictions, how do we deal with that, given all the big priorities and the implications of being supportive of the Arab Spring from a security perspective? What is your view on that?

GRANGER: It's very difficult. And your job is very hard in particularly in these times. And, believe me, I recognize that.

There is a mistake, I think, that's been made, and that's when we said -- and we do; we've overspent and we have to cut back. There's no doubt about it; it's a very strong message and people were watching very carefully.

So when we said we must cut back in everything except defense, we left out the understanding -- when I said we're talking about defense, we have to include state foreign operations because in the transitions in Iraq, defense did almost everything. And we said -- they were doing nation-building and things that the State Department had traditionally done.

When we turned our attention back to Afghanistan, there was a move to correct that. And so you know, of course, so much was transition from defense to State Department. But when people started saying, cut back but not in defense, they didn't recognize that transition and what we were asking the State Department to do.

And so I spoke over and over and said, you've got to -- we've got to understand and recognize that too because, again, if we move the military out, we're leaving State Department in there, unless we're going to leave altogether, which is not the plan and would not be the right decision.

So we've got to recognize that and fight for that kind of funding and transition. That's what the -- in the -- probably is going to be -- I don't know what we're calling it, what kind of bus we're calling it now, omnibus, minibus, all of that, but there is that set-aside that says, here's what we're not touching, and we've got to recognize what the State Department and civilians are doing in those countries and the security that needs to be provided for them.

QUESTIONER: Jim Landers, Dallas Morning News. President Obama said the other day that one of the great accomplishments of President George W. Bush was the PEPFAR program and what's happened in Africa. They're still talking ambitiously about, you know, the end of AIDS. President Bush is still out there working this issue himself.

Have you talked with President Bush about that aspect of our foreign aid budget, and do you have any hope that it's going to remain a big component of what we spend?

GRANGER: I certainly hope that it will remain. And I think that was one of the unrecognized achievements of President Bush. PEPFAR, Millennium Challenge, they were very, very important.

And I'm going to tell you as a Texas Republican, a friend to the president, until I came on that subcommittee I didn't understand the achievements that had been made. And now we put so much -- we were talking all about today about our foreign assistance the country is having primary to its security, but what we've done in health care, and our contribution of the United States, has been remarkable because the success is so remarkable.

And so it's not just people -- the president will make an announcement -- we're going to give 5 billion (dollars) here, 15 billion (dollars) there, but to understand what's happened with that money and the progress that has been made really is remarkable, and he certainly deserves a great deal of credit. And I believe that we'll pull that together and we'll be able to maintain that because we can show the results. We can show the results in infant mortality, maternal mortality. The significance of what we're doing with vaccines is amazing.

And one of the things that was important, and President Bush certainly recognized this and President Obama does, it's not just the U.S. government. It's the Gates Foundation, it's the ONE Campaign, all that we've put it together as well as a great deal of support from U.S. businesses that have been doing -- and have plants in countries that need that support. They have been wonderful in their support.

So I think there's still a great story that needs to be told about the success, and that's how we'll get the support.

MOSSETIG: David?

QUESTIONER: Thank you. David Short with FedEx. And I'd like to come back to the prospects for peace between the Israelis and Palestinians, specifically looking at the political situation on both sides, wherein Gaza, the Palestinians have chosen Hamas. On the Israeli side, through a democratic process they've put in a right-wing government. Are the people on both sides really prepared to make the hard choices, the hard compromises for peace?

GRANGER: I don't know that they are. I know that they're tired of being under attack. I mean, the stress of the living conditions is enormous.

When we were there in August, there was a woman that was scheduled to speak to us and tell us about what life was like. And her area was shelled literally two days before, so she agreed to speak. It was the most emotional thing that you can imagine as she says, you know, this is my life: I wake up, I try to get my 12-year-old to school and to soccer practice, and I'm going to work but, you know, do we need to go to the shelter today?

And she went back and forth about that, what it was like year after year and why the people -- the members of Congress there -- now, there were 27 freshman members of Congress that went to Israel to understand what we're dealing with there. And the question was, so, why don't you leave? But she said, this is my home. This is my home; this is my job. My parents are here.

But this is the reality of living under these conditions. I think that there is a time to say, that's not worth it. How can we really move toward a peaceful situation? One of the things that has been so helpful in our funding is not just the funding but the attention that's been given to the security part -- as I said, the Israelis and the Palestinians.

And so how do we -- so, if you see that our funding can help and our plan can help toward living together or close to each other but in a secure situation, that helps lead to peace. And that's a very important responsibility that we've taken on.

MOSSETIG: The gentleman in the back.

QUESTIONER: Ma'am, Jason Bartoleme (ph). I work in the office of Senator Orrin Hatch.

Ma'am, you were discussing a little bit about the priorities in our vital national interest, and I think some of the frustrations that we see is that foreign aid, it's hard to tie why our foreign aid is so important to our vital national interest. And this goes to our national security strategy.

So I guess my question to you, ma'am, is could you articulate, from where you sit, how comfortable you are with where we're going as a nation in our strategy, and if there are any -- if there are any things that we must do to be able to tie the linkage between foreign aid and our vital national interests -- because sometimes I think that's lost in the conversation -- and how that relates to what we're trying to accomplish in the Middle East. Thank you.

GRANGER: First of all, when you call me ma'am, I either know I taught you or you were in the military. (Laughter.) I don't think I taught you.

This is where I think it's going to happen. No, I don't think we're articulating the way we should. I don't think we're clear. I don't think we're clear in our intention so it's very hard to be clear in your message.

But after the supercommittee failed to come to -- to come up with a plan, now we're falling back into those cuts that are mandated. That's going to force us to say, what is really in our national security interest? What are we going to fund?

I hate for us to do it in a pressured we-have-to-do-it, but I think that may be the only way we say very clearly, this is in our national security interest and we must articulate that and have a foreign policy that people understand. They may not agree with it, but they understand where we are. I can't do that today.

MOSSETIG: Nostalgic for the days of the Cold War when it was a lot clearer.

GRANGER: It was clearer.

MOSSETIG: Sir?

QUESTIONER: Hi. Chuck Price (sp). Two questions, if I could. First, a little outside your AOR, but with respect to our expenditures on military national security, particularly overseas operations, I wonder if you had any thoughts about the bang for the buck that we got in the Libya operation where we leveraged use of air and naval capabilities that were unique to us in a NATO operation and got, you know, a result which was significant and less costly than other approaches.

And the second question is on Central America. You mentioned Mexico, and I wonder if you had any thoughts about significance to our national interest of the Central American countries.

GRANGER: Let me answer the second one first.

We did -- when we went into Iraq and Afghanistan -- or I should say Afghanistan and Iraq, we really took our eyes off the rest of the world in many ways. We were so focused on that. And so Central and South America, our neighbors -- I said, from our perspective and our bill and our funding, our attention, that will be a major focus.

That was why it was very important to me that the first trip that I -- congressional delegation that I led as the chairman, I said it will be South and Central America and we'll be back, and to make sure that we're paying attention and that we don't turn around one day and say, my gosh, we just lost. You know, what is the relationship? We're not paying attention.

And they said, are you going to come back? Is it the one-time thing? No, it's not a one-time thing. And so, to establish not only the relationships there but, you know, Congress to congress, Congress to parliament. So it's a continuing relationship and I think that is very important.

How much bang do we get for the buck? Let me tell you, we still are the greatest military in the world, in the history of the world, and our equipment is the best. Now, are we going to keep that? Are we going to make sure that -- well, we can't do that with 50 percent cuts.

But the other thing is -- and the criticism has been are we -- in this world, in this battle, are we still fighting the old battles? And we, at this time, have to reassess and say, do we have the equipment for the battles ahead, not the battles behind us? Do we have the equipment? Are we light? Are we flexible? Are we quick?

And that day, 9/11, when I was at the Pentagon, I was having breakfast with Donald Rumsfeld. There were eight of us that had been very involved in defense. And we were having a breakfast to talk about, do we have the military and the equipment for a world that's changing literally daily?

No one had any idea what was going to happen that day. It was never discussed. But the discussion was, how do we go forward? And we're meaner, leaner. We left and the whole world changed. So we've got to keep that in front of us and not just battle for this program or that program, but what keeps us safe, and also what keeps us as a leader in the world for those that we are also protecting so they have that equipment too.

MOSSETIG: I think we're just about wrapping up, and I'm going to take the prerogative of the chair and ask you a very Washington question.

2007 and '8 you endorsed and worked hard for Mitt Romney. So far in this cycle you've contributed to your governor. Whom and when are you going to endorse?

GRANGER: I will endorse and probably fairly soon. When I endorse, then you'll know who that is. (Laughter.)

MOSSETIG: Well, thank you very much --

GRANGER: Thank you.

MOSSETIG: -- for a very full, interesting presentation. I know you've got meetings on the Hill. Good luck. Thank you. (Applause.)

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